Gulf Conflict Reignites Global Anxiety
Global markets brace for seismic Monday as West Asia edges toward full-scale conflict, airspace shuts and Iran’s supreme leader’s death shakes economic confidence.
The Gist
The recent US-Israeli strikes against Iran have drawn parallels to the 1990 Gulf War, raising concerns about regional stability and economic repercussions.
- Major cities in the Middle East, including Dubai and Bahrain, are experiencing significant collateral damage.
- The economic fallout from airspace shutdowns and rising oil prices is anticipated to be severe, affecting global markets.
For those of us old enough to remember the 1990 Gulf War, the current moment feels eerily familiar.
That conflict was the first true television war, beaming graphic images of guided missiles and live trench coverage straight into our living rooms.
It began when Iraq, then ruled by Saddam Hussein, invaded and occupied neighboring Kuwait. A coalition led by the United States served an ultimatum for Hussein to withdraw by January 1991. He refused, and the rest is modern history.
Hussein personally survived the 1991 retaliation by the US-led forces, but his regime could not survive the second American invasion in 2003—a conflict predicated on widely contested claims of weapons of mass destruction, which kept US forces engaged until 2011.
Fast forward to March 2026, and the geopolitical theatre has shifted.
From Talks To Strikes
The US and Israel have launched strikes against Iran. The precise reason for the timing of the attack remains opaque.
Until recently, several reports suggested that negotiations between Washington and Tehran—aimed at curbing Iran’s nuclear program—were progressing well. Some reports even suggested a conclusion that would have been agreeable to the United States had been reached.
In retrospect, it appears those diplomatic channels may have been a smokescreen, providing US-led forces the time to maneuver into formation even as the broader Middle East braced for an imminent clash.
Airspace Shuts, Tensions Rise
What the wider region, including the Emirates, clearly did not anticipate was the sheer scale of the collateral expansion. Bombs and interceptor debris have rained down on Manama, the capital of Bahrain, Dubai, Abu Dhabi, Doha, and Kuwait.
Tehran’s grim strategic logic dictates that all US military bases are legitimate targets, regardless of geography.
That sweeps up major air bases in or adjacent to these cities, as well as the headquarters of the US Navy's Fifth Fleet in Bahrain, which oversees the Gulf, the Red Sea, and parts of the Indian Ocean.
Whether by direct targeting or as a consequence of mid-air interceptions, the fallout has literally struck the heart of Dubai. Projectiles have impacted locations ranging from the iconic Burj Khalifa to a beachfront hotel in Jumeirah.
As it stands, commercial aviation into and out of most of the Middle East is suspended.
The economic cost of an airspace, airport and airline shutdown, now stretching beyond 48 hours - will be staggering.
The inconvenience caused to hundreds of thousands of transiting passengers—many of whom remain stranded across various global hubs—is incalculable.
There is no immediate end in sight. Iran has confirmed that its Supreme Leader, Ayatollah Ali Khamenei, was killed in his office on Saturday morning during the US-Israeli attack, though a succession plan appears to be in place.
War’s Oil Shock
Military history also teaches us that there is a strict limit to what aerial bombardment alone can achieve.
The threat of Iranian missile reprisals will thus linger, as will anxieties regarding maritime transit through the Strait of Hormuz.
So it does feel like the 1990s all over again, including that dreaded feeling at the pit of the stomach about what tomorrow might bring.
During the Gulf War, oil prices doubled from $20 to $40 a barrel by the way.
Oil prices will undoubtedly jump when the markets open this week, though a full doubling is unlikely given currently robust global supply and softening underlying demand.
Expect gold and silver prices to shoot too even as stock markets fall.
Where Does This Leave Us?
India, for one, is in a vastly different place today than it was during Desert Storm.
New Delhi began opening its economy at almost the exact moment the Gulf War commenced.
By dismantling the stifling licensing regime and embracing market liberalisation, Indian industry grew vastly more competitive and capable than it had been in previous decades.
Tariffs in India fell steadily for 13 years until 2014, before protectionist instincts crept back in.
Now, spurred by pressure from the United States and impending free-trade agreements with the European Union and the United Kingdom, those tariff barriers are set to fall once again.
The medium- and long-term impacts of the strike on Iran remain clouded in the fog of war and many consequences are impossible to predict.
Resilient, But Vulnerable
The coming weeks, if not months, will be difficult for India and Indians, around 9 million, who live in and depend on the Middle East for their livelihoods.
India approaches this crisis stronger and more resilient precisely because it is, despite recent hurdles, an open economy.
Crisis always leads to reform in India but waiting for them to drive internal change is not the best way of doing things either.
In the last year, it was a global trade war that rang the reform bells for the Indian economy.
Now, it is just war.
